Front and Centered opposes Initiative I-732, not just because it gets equity wrong, but because it gets climate action wrong. As part of a series of posts clarifying our priorities in contrast to I-732, we offer in this blog the case for why a ‘revenue neutral’ approach to carbon pricing will not convey the carbon reductions necessary and would setback a Just Transition for communities of color and people with lower incomes.

Anyone who deeply cares about a sustainable world knows that climate action requires an unprecedented shift in our economy and society. We must move away from the consumption of carbon intensive fossil fuels through low-carbon goods, services and behaviors, renewable energy, and sustainable infrastructure. Using equity as a measure of success will drive change faster and better.

How does equity help everyone? When you protect the worst hit, you require the deepest change. Black Lives Matter has taught us this. The Lummi Nation has taught us this.

Some would argue that clever tinkering with market forces is all we need in carbon reduction policy. Set a price on carbon and let the market take over the wheel – this is I-732 in a nutshell. Business as usual. In a recent series of posts, Sightline Institute, a mainstream environmental think tank, reinforces this point. They argue that I-732 isn’t perfect by equity standards, but that shouldn’t stop anyone from voting for it.

But because of racial and class discrimination, market forces have never been kind to people marginalized, nor to date are there effective examples where market forces alone are strong enough to achieve the scale of carbon reductions necessary. We need to harness the market, no doubt, but market solutions in isolation will prioritize profits over carbon reduction and equity. In this post, we will explore how I-732’s ‘revenue neutral’ approach, as lauded by Sightline, is a false promise for equitable carbon reduction.

Carbon Policy Without Equitable Green Investments Will Fail

I-732 relies completely on carbon reduction from a market signal from raising the price of carbon-based fuels. While a putting a price on carbon, like I-732’s $25-per-ton tax, can and should play a major role in shifting to new patterns of economic activity, a growing body of research suggests that a price signal is only one of many factors that influence the consumption of fossil fuels. Many, perhaps most, consumption choices are structured by government and industry, and not easily changed without investments to create alternatives. Alone, a market signal will leave us short of the finish line in the march toward decarbonization.

A good carbon pricing strategy must be coupled with an equitable, green investment strategy. Despite wrapping itself in claims of equity, I-732 does not represent a solid step towards fossil fuels reductions, but rather a deeply flawed strategy that could delay effective action.

In defense of I-732, Sightline argues that public investment in some clean energy solutions is not only unnecessary, but may be a waste of resources (a view we have also heard from talking heads at Fox News). In their post, Sightline states that most clean energy solutions will be developed by the private sector as the carbon tax kicks in, without the need for public funding. The authors conclude that I-732’s market mechanism will provide a more stable and efficient path to carbon neutrality.

But can supply-and-demand forces really achieve the complete economic overhaul we need in the long run? As the Broadbent Institute, an Ottawa-based think tank, explains well, market forces put a premium on the most cost-effective, but not necessarily the most significant carbon reductions.

A carbon price alone, they argue, will stimulate demand for lower-carbon fuels, like natural gas, in the short run. But in order to achieve emissions reductions targets, these fuels will soon need to be replaced with better, carbon-neutral alternatives. The result will be unnecessary spikes, and subsequent drops, in demand for gradually less carbon-intensive energy sources and materials. Public investments in research, development, and proliferation of technologies that help us take the final step toward carbon neutrality are needed to leapfrog fuels and energy sources that are only marginally better than today’s worst culprits.

To be clear, Sightline makes the case for investing in some renewables that the market, under carbon taxing, would not produce. But, they argue, we should raise additional public funds for these rather than actually use the revenue created by the carbon tax for carbon reduction.

This is wishful thinking. If backers of revenue neutral carbon taxing think that the voters of Washington are only willing to change their behavior if they get a rebate check, why would we believe that they will usher in the new era of progressive taxation needed to invest in clean energy and a Just Transition? We believe voters, especially communities of color, are more ready to support climate action than Sightline and the I-732 drafters realize. But we have to get carbon pricing and a smart use of its proceeds right; the first time.

Where do we need equitable carbon reduction investments? The answers are clear:

Proponents of I-732, including Sightline, assume that increasing the price of fuel will deter driving, resulting in significant reduction in carbon emissions. However, our research suggests that it may not be so simple.

A 2008 study by the U.S. Congressional Budget Office found only a weak correlation between gas prices VMTs and noted the necessity of additional policy tools to “produce better outcomes for society than would result from pure market forces.” The University of Wisconsin’s State Smart Transportation Initiative draws similar conclusions, and this study by the U.S. Energy Information Administration finds a much stronger correlation between VMTs and GDP, than between VMTs and gas prices.

Moreover, much of this research suggests that the weak correlation between gas prices and VMTs is getting weaker. For example, upper-middle class families with multiple transportation options – who can more easily switch to alternative modes – comprise a much smaller share of the driving population than they have in the past.

This means that increasing the price of travel, without providing affordable alternatives, has a harsher impact on people with lower incomes. And without affordable alternatives, fewer low-income households will reduce their VMTs and, subsequently, reduce transportation-related greenhouse gas emissions.

Proponents suggest that the Working Families Tax Rebate and reduced sales tax will offset regressive impacts to energy prices for those who qualify, and we don’t dispute that. But offsetting costs is not the same as providing low-income families with alternatives to carbon heavy transportation.

I-732’s tax offset will not put low-income Washingtonians on par with wealthy consumers in terms of purchasing power, so more expensive, low-carbon alternatives will remain out of their reach. This is a problem that the market would be slow to fix, because lower-income families don’t exert as much pressure on the market as wealthy consumers, who can buy the latest and most efficient technologies. While fuel efficient and electric vehicles, for example, are getting more affordable, they are still only realistic options for most low-income consumers with the help of government subsidies—some of which are funded through carbon revenue in places like California.

This study by Resources for the Future finds—and indeed, the lived experiences of the low-income workforce corroborate—that mobility infrastructure and land use might have a stronger impact on VMTs for low-income households than gas prices. Sightline acknowledges that I-732 fails to support climate justice investments, but dismisses them as non-essential, failing to realize that targeted investments are an indispensable complement to a price signal that can make carbon pricing effective and equitable.

Affordable Density

Affordable housing is also a critical investment for climate justice, especially for the Puget Sound region. Our transportation emissions are closely related to our housing affordability crisis; when people can’t afford to live where they work, they spend more time on the road. This outcome is more pronounced for the region’s very low income communities than for anyone else.

A 2015 study by Zillow found that the median commute distance for Seattle-area residents earning $15,000 or less increased from 12 miles in 2006 to more than 21 miles in 2013, while those with salaries above $40,000 barely saw their commutes change at all. A more recent analysis by the Puget Sound Regional Council shows concurrent skyrocketing rents and a dramatic rise in freeway congestion. To the extent that urban sprawl is the enemy of responsible climate stewardship, and that low income communities of color increasingly shoulder its burden, prioritizing affordable urban density is imperative.

However, much like the need for mass transit and better urban planning, the high demand for affordable housing does not naturally increase its supply. In July, the Urban Institute and the National Housing Conference released compelling research showing that affordable housing without significant public subsidies in many urban markets is unrealistic. Additionally, efforts to cut capital costs can often result in less energy-efficient housing, even though low-income tenants would benefit the most from lower energy bills.

Energy efficient, affordable housing in high-density urban areas near jobs, schools, and services creates a double bottom line, cutting emissions from both the transportation and energy sectors. We need a carbon pricing policy that prioritizes this kind of investment, which I-732 utterly fails to do.

The failure of market forces to stimulate demand for and supply of climate-friendly housing, urban planning, and transportation is another warning light that a price signal alone falls far short of progress on climate justice. Sightline and supporters of I-732 imply that tax relief is equitable enough equity to garner support from low-income communities and people of color. While many of our member organizations have long advocated for progressive tax reform in this state, we continue to assert that Sightline’s argument misses the point.

Low Carbon Power

Clean energy, including energy saved through conservation, is one of the lower-hanging fruits of de-carbonization that we can make happen now and need to prioritize for any carbon pricing revenue. Encouraging energy demand reduction and growth in the renewable energy sector, particularly for programs like community solar and other renewables that are more reliable in a changing climate than our state’s hydropower, will pay their own economic, equity, and environmental dividends that are both tangible and politically attractive.

A climate policy that relies on market forces alone cannot equitably deliver low-carbon—much less carbon-free—alternatives to those who do not wield adequate power in the market. And that’s most of us. Moreover, market forces do not deliver the structural changes to the built environment, energy supply and economy that are as imperative to reducing greenhouse gases and their criteria pollutants as they are to promoting racial and social justice.

The inherent limitations of a price signal alone, in other words, perpetually exclude low-income communities of color whose needs must be prioritized in climate policy in order to not be forgotten. This is the definition of equity. Our Principles for Climate Justice set guidelines for such a policy. Indeed, had I-732 been designed with input from impacted communities, as our Principles demand, it likely would not have had the shortcomings we identify here.

Getting it Right, the First Time

Sightline and other proponents of I-732 acknowledge the climate benefits of investing in urban planning and sustainability solutions, such as those discussed above. But, after agreeing on the necessity for these measures, they are quick to assert that “I-732 does nothing to preclude Washington from investing other public funds in the clean energy transition,” and that “carbon tax revenue need not fund them all.”

We find this call for additional policies and programs hard to reconcile with Sightline’s own evaluation of our regressive tax structure, which forms the crux of their analysis in favor of I-732 on behalf of low-income Washingtonians: if our upside-down tax structure is burdensome enough on those with the lowest incomes to render tax relief a valid use of carbon pricing revenue, how can we justify an additional tax or fee to pay for solutions?

To do both is duplicative and therefore excessive, and it’s also highly unlikely to happen (see: Washington’s failed attempts to fund education). Technically, Sightline is correct that nothing in the text of I-732 prohibits other, more meaningful progress on climate change, but the text of I-732 is not the only inhibitor of such progress that worries us.

At Front and Centered we do not believe that we will have endless opportunities to get something as comprehensive as carbon pricing right. We owe it to our communities to get it right the first time.